Surmounting Budgetary Crystal Meth and the Ring of Fire
Friday, 5 October 2012
“…when it comes to debt and to the prospects for future debt, the U.S. is not a ‘clean dirty shirt.’ The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth….
“The International Monetary Fund, the Congressional Budget Office and the Bank of International Settlements compute a ‘fiscal gap’, which is a deficit that must be closed either with spending cuts, tax hikes or a combinations of both which keeps a country’s debt/GDP ratio under control…
“Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline… Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the ‘Ring of Fire’.”
Bill Gross, Chairman, PIMCO 10/02/2012
It is refreshing to hear a Lionized Establishment Figure such as Bill Gross (whose PIMCO has $1.8 Trillion under Management) make a Public Statement which approaches the Truth.
While Gross’s Statements are True, they do not tell the “Whole Truth”, and therein lies Opportunity for Investors.
The Whole Truth is that the “Ring of Fire” is here already and we have been temporarily Insulated from it only through a combination of Fed and ECB Interventions (which depress Rates in the short-term, but guarantee Galloping Price Inflation in the mid and long-term) and Bogus Official Figures (see Note 1).
Regarding Price Inflation, the Major cause is the Central Banks/Official Interventions via QE and otherwise.
And now QE4 has just been unofficially announced by Charles Evans, Chicago Fed President and voting FOMC Member in 2013. He says The Fed should continue buying (unsterilized!) Treasuries after January when Twist ends. Indeed, “Unsterilized purchases mean that they will surely be Price-Inflationary.
By the way, regarding ‘Bogus Official Numbers’, Former General Electric CEO, Jack Welch, nailed it when, referring to President Obama’s Poor Debate Performance and the Subsequently Released Ostensibly Improved Job Numbers,
“Can’t debate, so they changed the job numbers.”
In fact, the Ostensible Net U.S. 114,000 Jobs created does not even keep up with (Official) Population Growth of 175,000 per Month.
Real U.S. Population Growth is Twice that with Virtually all of it generated by Legal and Illegal Immigration.
Regular Readers indicate they appreciate our keeping them updated on the march to Hyperinflation – CPI in the U.S. is now at 9.33% e.g., per shadowstats.com (See Note 1).
And with QE3 ongoing and QE4 coming down the Pike, (aimed at keeping Rates low and propping up the Mega-Banks). The Inflation of which Gross warns has already begun.
The resulting (from ongoing QE) Price Inflation is already obvious in the Prices of Tangible Assets which get used up such as Energy and Food.
Gross’s comment “…inflation would follow…” would have us believe Inflation is not already here, a serious omission.